💸The customer retention market and its problems

Asking any businesses around the world, from a global e-commerce platform like Amazon to a mom & pop shop in a tier 3 city in Vietnam, the owners know the critical importance of repeat, loyal customers. That’s why companies worldwide spend $143 billion in 2022 for “loyalty programs” and are projected to reach $226 billion dollars in 2026 to keep customers coming back.

Despite spending an aggregate amount of hundreds billions annually, most businesses struggle to retain customers. Users often find “loyalty programs” are limited, illiquid, isolated, complicated, opaque and short-term. Businesses, on the other hand, find loyalty programs create mixed results with high development and maintenance costs yet fail to improve customer loyalty in a meaningful way. Majority of businesses are not capable of having their own loyalty program in the first place.

The fundamental problem of most reward/loyalty programs is its illiquidity and limitation in usage (accepted only by 1 company issuing it; points can only be exchanged for few and little benefits). That’s why we see the most successful loyalty programs always have multiple accepted partners and a lot of different benefits/usage. But since loyalty programs are often centralized and controlled by one organization, it’s very difficult for other organizations to trust the integrity and value of someone else’s points. The lack of trust and transparency in turn limits the adoption of any reward system.